State Officials: Senate Transportation Bill Measures Could Kill Private Investment, Jobs

Yesterday I blogged about the surface transportation authorization bill approved by the U.S. Senate on Wednesday, which despite its deficiencies has won mostly praise, particularly for the bipartisan nature in which it was conceived. But a last-minute change in the Senate bill is drawing the ire of some state officials who believe it could hinder their efforts to use private financing to help get more transportation projects built at a time when funding from other sources is drying up.

An amendment written by New Mexico Democrat Jeff Bingaman was tacked onto the bill that would likely discourage states from leasing roads to private operators by reducing the amount of Federal highway money states receive each year to account for roads that have been privatized. Other provisions in the bill would limit tax breaks for companies such as Macquarie Infrastructure that operate highways for states including the Indiana Toll Road, the leasing of which was the largest U.S. public-private partnership road lease deal to date.

As reported by Bloomberg Businessweek Thursday, Indiana Gov. Mitch Daniels described the Senate bill’s privatization provisions as “a vote for the crumbling of America.”

“It elevates a big-government ideology over a practical need to build our roads, bridges and other infrastructure,” Daniels said. “It is a backward and senseless proposal, and we’ll urge the House to put it directly in the wastebasket of bad ideas.”

Virginia Transportation Secretary Sean Connaughton had more harsh words for the provisions. Connaughton, who is the Vice Chair of CSG’s Transportation Policy Task Force, described it as a “job killer” that runs against current U.S. law and exposes states to delay, uncertainty and potential litigation, Bloomberg reported.

As I’ve reported before, Virginia has been one of the most active states in the country in nurturing public-private partnerships to help fund major infrastructure projects. Connaughton believes all that could be at risk if the provisions become law.

“Due to the economy, we are getting a lot of projects moving due to the lower prices,” Connaughton told Bloomberg. “The Senate action will stop those projects and their associated jobs.”

The business community doesn’t appear to like the measures either. Alex Herrgott, a lobbyist for the U.S. Chamber of Commerce, said it would have an “unnecessary chilling effect” on private investment that will disproportionately harm high-growth states like Nevada, North Carolina and Texas.

Yonah Freemark also writes about the provisions in a post on The Transport Politic blog. He argues that they fly in the face of federal efforts to encourage private investment through other programs.

“Currently, states are provided highway funds in part based on their mileage of federal highways,” he writes. “(Sen. Bingaman’s) amendment simply says that roads that used to be public and were transferred to a private entity should not be counted in that calculation. Bingaman argued that drivers across the nation shouldn’t be subsidizing any state that has chosen essentially to sell off an existing highway to the highest bidder. He has a point, and his amendment seems likely to dissuade states from continuing down this particular path, but it does seem to be somewhat of a contradictory move on the part of the Senate: Does it want private investment through programs like TIFIA, or not?”

First enacted in 1998, the TIFIA program (the acronym stands for Transportation Infrastructure Finance and Innovation Act) provides loans to help states pay for large, partially funded infrastructure projects of regional and national significance. The program was designed to leverage federal funds with local or private investment. The Senate authorization bill would authorize a substantially expanded version of the program, the popularity of which has exceeded its funding levels.

More to Come on Public-Private Partnerships

Secretary Connaughton will be among the speakers at an important forum in June on public-private partnerships. This will be the second year CSG will be a supporting organization for the InfraAmericas U.S. P3 Infrastructure Forum, which takes place June 19-20 at the Metropolitan Club in New York City. Connaughton will be joined on the agenda by Tony Kinn, the Director of Virginia’s Office of Transportation Public-Private Partnerships as well as by other state officials from around the country, private sector developers and many others. The forum is a key opportunity for state officials of all stripes to network and learn about the latest trends in P3 infrastructure investment. To learn just how worthwhile the conference can be, you can check out my coverage of last year’s forum here and here. And I’ll have much more to say about this year’s exciting event in the weeks ahead.